Grape growers say they can avoid a new glut

Brad Goehring, a winegrape grower and vineyard developer in Clements, checks the growth on a San Joaquin County vineyard that was planted earlier this year.
Photo/Steve Adler

When developing a vineyard, the planting date may mean the difference of getting a harvest a year earlier than other plantings. This photo shows a San Joaquin County vineyard that was planted in early August.
Photo/Steve Adler

When developing a vineyard, the planting date may mean the difference of getting a harvest a year earlier that other plantings. This photo shows a San Joaquin County vineyard that was planted in early June
Photo/Steve Adler

Winegrapes throughout California are being planted at an accelerated pace, but there is little apparent concern among people in the wine business that the increased tonnage will result in a winegrape glut such as the one a decade ago, which resulted in removal of more than 100,000 acres of grapes.

Winegrape grower and vineyard developer Brad Goehring of Clements said the primary difference between then and now is that in the late 1990s and early 2000s, many growers opted to plant grapes because most of the other crops were not as profitable.

"The last time when grapes were doing well, nothing else was. Peaches were exiting California, sugar beets had left, tomatoes weren't doing well and alfalfa wasn't doing well," he said. "So for people who had open land and wanted a permanent crop, the only thing to put in was grapes."

This planting boom is different because growers now have several options, particularly the nut crops: almonds, walnuts and pistachios.

"Right now, you can get into just about any agricultural crop and some of them are actually a little bit better than grapes. I think there is a lot more competition for open land, and farmers have a lot of options to choose from," Goehring said. "I think it is going to be harder to create an oversupply as quickly as we did in the past, because of land availability and because of all the alternate choices for permanent crops."

That view was supported by John Duarte, another winegrape grower and president of Duarte Nursery, a large supplier of plants for permanent crops grown in California.

"Pretty much all segments of agriculture that we serve have opportunities for growers right now. Kiwifruit is even doing better and kiwifruit growers are making money," he said.

Sales of grapevines for next year are very strong, with steady demand coming from all parts of the state, Duarte said.

"We are seeing orders come in for real projects that are more certain to happen than what we saw in the past couple years, where growers and management companies were locking up vines early for what might happen, and that was creating a kind of artificial constraint on vine availability for some projects."

Duarte said he expects few if any shortages of grapevines to be planted in the next year.

"We have worked our way through the red blotch and some of the virus issues that upset grapevine availability in 2012 and the first several months of 2013," he said. "So for 2014, there are large volumes of virus-free plant material available for growers who want to plant vineyards."

Goehring's company plants vineyards throughout Northern California and he said orders this year are coming in much earlier than in the past.

"We have a tremendous amount of vineyards lined up to plant in 2014 already. Considering it is November and we already have a lot of acreage planned for our company to plant for next year, we know it is going to be another big year," he said.

Nat DiBuduo, president/CEO of Allied Grape Growers, said there has been significant planting development during the last three or four years and the number of non-bearing acres remains fairly large.

"It appears that the San Joaquin Valley still has significant plantings going in with various varieties. We are seeing some redevelopment on the North Coast and some new development on the Central Coast, which so far has been good for the industry. I am not concerned today that we are in any kind of overplanting mode," he said.

But DiBuduo said he does have a concern about a potential shortage of winery capacity as a result of new vineyard planting.

"We need a commitment from the wineries that they are doing their own capital improvements so they will be able to process all of these grapes. That includes processing, crushing and tank storage for these crops. I say that because this year, even though we had a long, orderly harvest, the wineries kept delaying some growers from harvesting because of capacity issues," he said.

Goehring, Duarte and DiBuduo all stressed the importance of growers having a financially viable, long-term contract with a winery before planting a new vineyard. Planting winegrapes is considerably more expensive than planting an almond orchard, for example, so farmers need to have a contract in place that will cover most of that investment prior to initiating the plantings, they said.

"In the San Joaquin Valley, it is $12,000 to $15,000 per acre to establish a new vineyard and on the North Coast and Central Coast it can be $20,000 to $25,000 per acre. So a San Joaquin Valley grower can plant two-and-a-half acres of almonds for the cost of planting one acre of grapes," DiBuduo said. "The years that we ran into problems in the past were the years that the growers just made the financial decision to plant without a contract."

Duarte agreed, saying he doesn't know of any major plantings of winegrapes that are going in right now that are not on a long-term contract with a winery.

"We just do not have large, speculative plantings of winegrapes going in. And that is different from what was happening in the 1990s," he said.

Long-term contracts are generally for 10 years, especially on a pre-plant, because a farmer needs to be able to recoup his investment, Goehring said. The two variables on these contracts concern price per ton and minimum quantity that the winery will purchase. Growers need $6,000 an acre in annual gross revenue in order to recoup their investment, he said.

Goehring said larger wineries have been figuring out "how to make better wine with higher-volume fields."

"It is keeping their costs down per ton, per unit, and it is allowing us to make the money we need to recoup our investment," he said.

(Steve Adler is associate editor of Ag Alert. He may be contacted at sadler@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.